SOCIAL PERFORMANCE MANAGEMENT (SPM) TOOLKIT MANUAL

Transcription

1 Offices across Africa, Asia and Latin America SOCIAL PERFORMANCE MANAGEMENT (SPM) TOOLKIT MANUAL Prepared By: Matt Leonard With: Chris Linder, Meryem E. Faris, Neeraj Lal and Alice-Mary Meggs November 2009

2 Social Performance Management Toolkit Manual 2 Table of Contents I. Introduction: Putting Social Performance Management into Context... 1 What is Social Performance?... 1 What is Social Performance Management?... 3 What are the Various Tools used in Social Performance?... 3 What is MicroSave s SPM Approach and How is it Different?... 6 Why Opt for Social Performance Management?... 8 II. MicroSave s Social Performance Management Approach Mission and Governance Understanding/Responsibility to Clients Improving Performance: Client feedback Client Services Alignment of Strategy and Systems Strategic Business Planning (SBP) Understanding/Responsibility to Staff Other Key Categories Responsibility toward Community & Environment III. Preliminary Work: Determining the Role of Social Performance Management in an MFI s Institutional Strategy Creating a Socially Performing Institution? Considering the MFI Expectations and Wishes Assembling a Social Performance Management Team IV. The Process: Diagnosis and Analysis Auditing Internal Documentation Assessing Current Performance V. The Process: Analysing the Results VI. The Process: Developing a Strategic SPM Action Plan ANNEXURES 1. SPM Visit Programme Guide Social Performance Management Indicators Social Performance Management (SPM) Indicator List Inventory of Staff and Client Interaction Tools SPM Glossary... 55

3 Social Performance Management Toolkit Manual 1 I. Introduction: Putting Social Performance Management into Context Whenever you are in doubt Recall the face of the poorest and weakest man whom you may have seen, and ask yourself if the step you contemplate is going to be of any use to him. Will he gain anything by it? Will it restore him to a control over his life and destiny? M.Gandhi Microfinance is a double bottom line industry, aiming to provide the poor and the underserved with permanent access to an appropriate range of financial services. 1 As the core of a Microfinance Institution s (MFI) activities is to provide financial services, this mainly implies that financial results must ensure sustainability. However, the provision of services to the poor and underserved who are clearly vulnerable should be addressed with responsibility and due care. Moreover, the sector is facing new challenges, especially in India where microfinance is a growing industry. Many MFIs must adapt their structures in India, passing from an NGO/Trust model to an NBFC one. Competition is increasing, as well as financial pressures. New partnerships including private investors, commercial banks and other service providers are emerging. This evolving context increases the MFIs exposure to risks (described well in the 2009 Microfinance Banana Skins report). 2 Consequently, the double bottom line of microfinance is not guaranteed anymore. Now, social performance of MFIs cannot be taken for granted, and the risk of mission drift is real. This manual is designed to assist MFIs, Investors, Donors, MicroSave staff, other consultants and stakeholders in conducting the initial SPM diagnostic and action planning visit. Do note, that this does not mean one must follow this manual exactly, nor that one should be prescriptive in what SPM is or should be for an MFI. It is up to the MFI to define what is important, and any outside consultant or stakeholder must simply help guide the MFI to discover potential solutions for achieving that vision. One must therefore be open to new ideas and flexible in the application (or adaptation of the tools) depending on context. Subsequent versions of this manual may be further tailored to be shared with MFI staff directly so that they may conduct the assessment and action planning themselves. What is Social Performance? In the microfinance industry, social performance (SP) is commonly defined as the ability of an MFI to the effective translation of an institution's social goals into practice in line with accepted social values 3. This definition, which can be applied to all levels of performance in all operational aspects of an MFI, means that an MFI first should do no harm & second is proactive in fulfilling its mission (rather than assuming it will happen without action). 1 Adapted from Robert P Christen, Richard Rosenberg & Veena Jayadeva. Financial institutions with a double-bottom line: implications for the future of microfinance. CGAP Occasional Paper, July 2004, pp ² Microfinance Banana Skins Risk in a booming industry, Centre for the Study of Financial Innovation (CSFI ) sponsored by CitiGroup & CGAP. 3 Inspired by the definition put forth by the Social Performance Task Force: 1

4 Social Performance Management Toolkit Manual 2 Do no harm simply means that the client should not have become worse off now due in part to the MFI s intervention than the level where s/he was before. This includes avoiding client indebtedness, not adding unnecessary administrative burdens on the clients, and stopping short of transferring risk to the clients. Proactive in fulfilling the mission aims to: 1) extend financial access to the underserved; 2) improve the quality and appropriateness of services; 3) create needed benefits for the clients, their families and communities, in line with the MFI s own capacities and strategy; and, 4) being socially responsible to all stakeholders, especially the MFIs own employees. 4 These concepts should be part of the raison d être of any MFI. MicroSave views social performance as about doing what you do well in a way that is more accountable to those you are already serving. This is why social performance similarly to financial performance should be expressed, assessed and managed. It should be expressed in the mission of the MFI through articulation of concrete goals. It should be assessed because it is the responsibility of any organisation to evaluate the effectiveness of its intentions and goals. And finally, it should be managed because desired results do not simply appear because they are written down or were part of a management discussion on one or two occasions. MFIs must actively implement actions, monitor achievements and make adjustments on a continual basis to see results. While each of the three components (express, assess and manage) are equally important and are all covered in MicroSave s approach, the latter of the three managing social performance will be the primary focus in this manual. Social Performance Process (Social Performance Map, SEEP Network et al, 2009) The figure above uses a framework defined in the SEEP Social Performance Map as a causal chain with several different yet closely linked aspects. The first step is the Intent and Design of the organisation, pertaining to the social mission, strategy and objectives and whether each is clearly stated. Second are the Internal Systems of the organization which covers the policies, various operational processes and activities undertaken by the MFI (from Operations to Internal Audit and HR) and whether these systems are aligned with their Intent and Design. This can include listening to clients better and designing/improving products and services that are appropriate to client needs. The third aspect covers Outputs, which refers to general outreach, customer profile and retention statistics, usually readily available in the MFI s MIS, and can give 4 Adapted from the SPTF Letter;

5 Social Performance Management Toolkit Manual 3 a first window into how well the MFI is targeting those who are mentioned in the mission and how well they are being served. Finally, Outcomes focuses on measuring whether clients are improving their social and economic status (or well-being), and Impacts attempts to establish a causal link between the MFI s intervention and clients progress in overall well-being. 5 The rationale being that providing appropriate services and reaching target clients, and achieving concrete changes in client s lives (outputs/outcomes), can only happen when an MFI s systems are well aligned with its intent. What is Social Performance Management? While social performance is the effective translation of an MFI s social mission into practice by achieving certain goals/performance standards set out by the MFI itself, social performance management (SPM) focuses on: 1) setting clear objectives and creating a deliberate strategy to achieve them; 2) designing and implementing systems that are aligned with social objectives; 3) monitoring and assessing progress towards achieving the social objectives; and, 4) using social performance information to improve overall performance and decision-making. 6 MicroSave s SPM is a client-focused approach that helps an organisation to align its key systems with its mission, including Strategic Planning, Operations, MIS, Human Resources, Customer Service, Market Research, Product Development and Internal Audit and Control, thus helping the organisation achieve its desired outcomes. Going beyond microfinance, some organisations may also include non-financial services, as well efforts to be responsible to the environment and community at large, as aspects of SPM if these are both of importance to the organisation and in alignment with its mission. What are the Various Tools used in Social Performance? Source: Social Performance Map, p Social Performance Map, SEEP Network, AED, and USAID, Adapted from Putting the Social into Performance Management, Campion et al, Imp-Act Consortium/IDS, 2009 and the SPM Principles

6 Social Performance Management Toolkit Manual 4 As the social performance industry has evolved and a myriad of social assessment tools have emerged. These can be divided into five groups 7 : 1. Social Audits/Assessments (blue section in figure above) These tools help institutions evaluate their intentions, systems and actions to determine whether they have the capacity and have addressed the internal processes adequately to attain their social objectives. These tools are often used for internal purposes only, for the MFI to improve their systems and processes. These tools focus on the Intent and Design, Internal Systems, and Outputs stages of the social performance framework. CERISE Social Performance Indicators Initiative: The CERISE Social Performance Indicators (SPI) tool assesses the social performance of institutions by evaluating their intentions and actions. MFC Quality Audit Tool (QAT): The QAT was designed by the MicroFinance Centre (MFC) in Poland in conjunction with the Imp-Act Consortium to correspond with social rating methodology used by M-CRIL and Microfinanza Rating. ACCION SOCIAL: The ACCION social diagnostic tool is a framework through which it assesses social performance in order to evaluate the success of the MFI in fulfilling its social mission and contributing to broadly accepted social goals. 8 USAID Social Performance Audit (SPA) Tool: The USAID social audit tool uses a "process auditing" approach that evaluates the MFI in reference to its stated social mission Social Ratings (red section in figure above) Social Ratings are generally used by MFIs for external purposes to be shared with donors, lenders or investors and focus on the same three areas as Social Audits but also include outcomes. Several rating agencies have developed tools to complement their financial ratings to fill the expectations of social investors. These include: M-CRIL: Based in India and affiliated with EDA Rural Systems, M-CRIL pioneered the social rating concept. According to M-CRIL, the purpose of the social rating is to assess the likelihood of an MFI achieving its social mission in line with accepted social values. The analysis focuses on several dimensions of social performance: 1. Social mission and systems 2. Policies and systems for social responsibility 3. Outreach Microfinanza: (Italian-based, global rating agency) The MicroFinanza social rating is based on the audit of the social performance management system of an MFI and on a detailed assessment of its social results. 7 This section draws from Social Performance Map, pp Microfinance Gateway: 9 SPA is an audit tool that falls under the red section of the framework as it also focuses on outcomes but is primarily used for internal purposes and has therefore been positioned in this section.

7 Social Performance Management Toolkit Manual 5 Planet Rating: The rating agency of Planet Finance offers a tool that provides an opinion on the capacity of the MFI to achieve its social goals. It relies on evaluating the quality of MFI s social accounts coupled with an analysis of country data. They focus on the institutionalisation of the mission, outreach, service offerings, and social responsibility. MicroRate: Their Social Rating combines an assessment of the MFI s social performance with an assessment of social risk defined as the risk that the MFI deviates from its social mission and fails to produce forward looking outcomes. 4. Poverty Assessment Tools (green section) 10 Poverty assessment tools typically consist of those tools used by MFIs (particularly those with a focus on poverty) to understand if it is reaching its target market and/or predict the likelihood of poverty. They include: Progress out of Poverty Index (PPI): Developed by Grameen Foundation, it is a set of country-specific poverty scorecards. Based on statistical analysis of national household expenditure surveys, it uses a small set of simple, easily observable, and objective indicators, and estimates the poverty likelihood of a person or group of persons, defined as the probability that they fall under an identified poverty line. USAID Poverty Assessment Tool: It is a set of country-specific surveys to predict the prevalence of extreme poverty within a group of people. The surveys include between 16 and 33 poverty questions derived from national household surveys. The tools make poverty calculations based on an aggregate group of people but are less accurate (and not explicitly designed) for measuring poverty on an individual basis. FINCA Client Assessment Tool: This is an open source tool that employs a set of 13 individual screens to record income sources and dependents, monthly household expenditures, daily per capita expenditures, and documenting spending on 6 social factors (food security, housing, education, etc). The Food Security Survey: This a nine-question survey developed by Freedom from Hunger that measures household access to food through available resources to purchase or barter for food. Housing Index: The housing index implemented by Cashpor uses the structure of the house, and sometimes the housing compound, to differentiate between economic levels of households and identify those who are poor. CGAP Poverty Assessment: CGAP collects rigorous data on poverty level of clients by using a survey on 200 randomly selected clients and 300 non-clients, but takes about four months to complete. 4. Impact Assessments The purpose of an impact measurement is to provide an in-depth understanding of changes occurring in microfinance clients, and to further assess whether they can be attributed to (or are caused by) the MFI itself. It involves conducting research with the objective of attributing 10 The FFH Food Security Survey, Cashpor Housing Index and CGAP PAT are not mentioned in the SEEP Performance Map

8 Social Performance Management Toolkit Manual 6 observed outcomes to organisational activity. Impact is determined by the counterfactual, which requires comparing a treatment group to a valid control group. There are several academic institutions and individuals that conduct impact assessments but are all constructed differently (and having evolved significantly over the years). SEEP/AIMS Tools: This tool is a quantitative impact survey based on a questionnaire applied to both sample and comparison group. It is important to note that the SEEP/AIMs toolkit uses many other tools that consist of in-depth individual interviews (Client Exit surveys, Client Empowerment, Loan use over time), and group discussions (Client Satisfaction survey) that can assist with outcomes. What is MicroSave s SPM Approach and How is it Different? As opposed to the popular view that an organisation must conduct a social performance assessment as an obligation to donor agencies or investors, MicroSave s approach is one that is more focused on social performance management being very practical and better linked to financial performance. Rather than a one-off social assessment or audit, SPM focuses on integrating social performance into the day-to-day management practices of an MFI. It should be market-driven in the sense that MFIs see the value and need to better achieve their double bottom-line and thus an SPM visit (or use of the toolkit) is undertaken at the behest of the MFI itself. MicroSave has designed a comprehensive SPM toolkit that consists of an audit of internal systems, processes and policies at the head office level, a diagnostic at the branch level with staff, and a particular focus on field visits and understanding an MFI s clients. All of this feeds into an overall diagnostic which helps an MFI s senior management design an action plan that includes identifying quick wins that can be rapidly implemented and integrated into the MFI s overall management systems. The approach also gives the organisation a wide range of client- and stafffocused tools to choose from that it can adapt as per its needs through a composite of qualitative interviews and PRA methodologies. More than an assessment, MicroSave s SPM approach is a participatory and dynamic process. Furthermore, knowing and serving your clients well is where MicroSave sees the overlap between social and financial performance and where the most benefit The Core of SPM MicroSave's Approach to SPM: Quick Low Cost Participatory Client-focused Practical Enhances both social and business performance a. Clarify social objectives and set clear goals b. Align, Monitor and Review systems and goals regularly c. Understand clients needs and preferences d. Improve staff satisfaction and customer service e. Communicate and use information on social performance Visit Overview

9 Social Performance Management Toolkit Manual 7 A preparatory phone call with the CEO or key staff person (or SPM Champion) is first made to understand the MFI s history, background, mission and to strategise and choose goals of the visit based on that MFI s interests. The MicroSave team also reviews key documents (business plan, manuals, MIS data, etc.) of the organisation ahead of time. Then, a five day visit is organised to check the systems and practices actually being implemented by the MFI on a day-to-day basis. The first day consists of meeting with senior management, key staff members and board members to discuss an overview of SPM, to plan out the week (including deciding on team members) and to conduct individual interviews. The next two and a half days are spent in the field with a strong focus on interaction with clients and field staff using Focus Group Discussions (FGDs), surveys and Participatory Rapid Appraisal (PRA) tools. On the last day, the findings of the visit and diagnostic are presented by the team to Senior Management and the Board. The latter half of the day is spent on assisting MFI leadership in the creation of a draft action plan for addressing those SPM areas needing focus (as decided by the MFI itself). A largely qualitative report on MicroSave s findings would follow the next week. MicroSave s team should return at least once in the first three months to help recalibrate the action plan, check-in on progress and assist in implementation of any major tasks. Ideally, the MicroSave team would also return after six months to monitor the effective implementation and progress of the MFI around social performance, helping them to adapt or evaluate the tools and solutions if needed. (See Annexure 1: SPM Visit Programme Guide) MicroSave SPM Deliverables An SPM visit by MicroSave typically includes the following key outputs: Improved Stakeholder, Management and Staff Awareness of Social Performance Social Performance Management report o Comprehensive assessment of how well the MFI is achieving its Mission o Client data on profile, product and service preferences, satisfaction levels, reasons for dropout/not-joining, etc. o Aggregate data on staff satisfaction levels, highlighting any areas of concern Strategic SPM Action Plan for ways to improve overall performance and ensure better achievement of the Mission. Mainstreaming SPM through MicroSave Toolkits MicroSave also believes in the notion that SPM should not become a separate, stand-alone set of activities (or department) but should be integrated into each and every key policy, process and system the MFI has, creating a more holistic view of performance management overall. MicroSave has already begun to integrate SPM content and approaches into several of its toolkits: Strategic Business Planning MIS Human Resource Management (Basic and Advanced) Governance Internal Audit & Control Customer Service Staff Incentives

10 Social Performance Management Toolkit Manual 8 Why Opt for Social Performance Management? The need to invest in social performance may not be evident for everyone, especially for those in a growing market with investors and lenders demanding sustainability above all else. Nevertheless, considering the roots of microfinance and most MFI s stated missions, assessing and improving an MFI s social performance should be a priority. Due to the dynamic growth and transformations of MFIs in recent years, many are now concerned about mission drift away from the original purpose of microfinance improving access to high quality and needed financial services to the underserved. For example, many MFIs do not know if they are reaching the stated target market from their mission, nor are they concerned with developing or providing high quality, needed services. By instilling a long term vision and focus attention on staff and clients into the core of the business, the MFI can boost overall performance. One of the most important outcomes of social performance management is that it can reinforce both social and financial performance. Indeed, strong financial performance can be seen as a means to assist in achieving social mission objectives (and vice versa). As Social Performance Management (SPM) aims to help the MFI fulfil its social mission by improving its systems, products and outreaches, each stakeholder must have an interest. The section below summarises the principal benefits of SPM to various stakeholders 11 : 1. Managers / Board To position itself publicly as a socially responsible organisation. This will also help link with the local communities and increase their support To help attract socially-minded investors To balance financial & social goals for a sustainable performance. Too much focus on the financial goals may make the institution drift from its mission and away from the needs of its clients To mitigate political risks, e.g. community backlash, by increasing transparency, protecting clients better, etc. To assess if the institution is achieving its mission and measure, track and improve its overall social performance To align & improve systems, e.g. HR, etc 2. Clients: Improving Outreach, Services & Products Improve client targeting by setting up objective indicators, such as client poverty levels, and tracking performance Monitor how clients use services and what their needs are Create new products or adapt existing products (or processes) to match the needs of the clients If desired, track progress as to the MFI s impact on the clients lives (and make changes as needed) Give clients greater voice in the microfinance programme and better protection of privacy, rights and livelihood 3. Investors: Improving operational and financial performance Better retention of clients/lower drop-outs Higher client growth Lower PAR due to more appropriate products and more satisfied clients. Higher staff productivity and lower turnover Improved financial performance and profitability 11 Simanowitz et al, Social Performance Management in Microfinance Guidelines. Imp-Act Consortium / IDS, 2005

11 Social Performance Management Toolkit Manual 9 If done correctly, and with the right amount of attention, many believe that a focus on social performance need not negatively affect operational or financial performance. At the very least, it should have a neutral impact on financial performance. Researchers in the corporate world have found a correlation between social performance and financial performance across a wide variety of industries and contexts 12. Likewise, for microfinance, a CERISE study (42 MFIs in Latin America) did find that a social performance focus may create additional costs in some ways (e.g. targeting the poorest), but other social performance factors, such as better tailoring products/services or reinforcing social capital, had a positive effect on financial results Staff Improved work environment and staff satisfaction levels Better understanding of and involvement in implementing the MFI s mission Will feel more motivated upon seeing clients more satisfied and benefiting 5. Local Community Improved engagement with the community for inputs around needs, e.g. non-financial services, if deemed important by the MFI Possible collaboration with other service providers or government agencies depending on areas of expertise Improved focus on the environment, if deemed important by the MFI 12 Orlitzky, Schmidt and Rynes. Corporate Social and Financial Performance: A Meta-analysis. Sage Publications SPI and Financial Performance Brief No.7: Studies of links between social (SPI) and financial performance (Mix) for 42 Latin American MFIs. CERISE. 2008

12 Social Performance Management Toolkit Manual 10 II. MicroSave s Social Performance Management Approach MicroSave s appraisal of an MFI s social performance management assesses the alignment of its key systems with its mission and its level of responsibility towards its staff, clients, and the community. The categories and questions below are derived from the SPM questionnaire that MicroSave suggests is useful to perform an SPM diagnostic. The questions are largely aligned with the mainstream of social performance indicators, as embraced most recently by microfinance industry reporting pioneer, the MIX Market. MicroSave has included these indicators to both ensure its alignment with the social performance industry, and to provide added flexibility to ensure that the toolkit is adaptable to an MFI s unique mission and context, and above all practical. There are four key areas of focus of the SPM toolkit constituting the baseline of the SPM visit. Mission and Strategic Intent Understanding/Responsibility to Clients Alignment of Key Systems Understanding/Responsibility to Staff These four key areas make-up the architecture of the questionnaire/checklist that guides the SPM diagnostic and from which the Debriefing Presentation depends and leads to the Action Plan (and the final report). (Note that the questions (Q:) refer to the SPM Questionnaire/Checklist which is included in full in the Annexures). Mission and Governance Mission Clarity Clarifying your organisation s social objectives by understanding its mission is the 1 st step to aligning social performance with an MFI s overall goals. An organisation s mission acts as its very foundation. A strong mission sets out: Goals; Vision; and, Values It defines who the MFI is and what the MFI aims to accomplish.(eg. Who it aims to serve, how it will serve them and what outcome it expects.) For example: 14 Serving the rural poor, especially women and youth by promoting and strengthening a self reliant, sustainable institution Who you serve How they will be served to develop their capabilities and improve their quality of life Outcome Mission is thus a logical place to start the SPM assessment not only to understand an MFI s intent and what is being measure, but also to then tailor the intervention to suit what is important to that MFI. Some of the questions asked include: Q: What is your MFI's mission? Ideally, the mission should be known from top management to junior field staff. More than the words of the mission, people should have a clear understanding of the social concept it contains. 14 Inspired by an example in Imp-Act s Social Performance Management in Microfinance Guidelines (2005)

13 Social Performance Management Toolkit Manual 11 Q: Is the mission communicated to all levels? Staff must be able to define in their own words what key terms mean. For instance, if the mission contains word such as improve livelihoods, empower women, or reach the low-income households, they should have in mind a clear example of what these terms mean and how it affects their daily activities. Q: Has there been any change in vision/mission? This question in appearance may be simple, but it is in fact a tricky one. An MFI s true mission may change unconsciously as growth ensues, new people are brought on board and new opportunities explored. In the case of such mission drift, an MFI should either realign the operations and human resources to meet the original mission or the MFI should re-examine the mission. This may entail adapting the mission to circumstances, but should not just be done because it is convenient. Nevertheless, objectives should be maintained and the mission should reflect your vision over the long term. It is up to the MFI and its key stakeholders themselves to appraise if an adaptation of either the operations or the mission is necessary and feasible. Q: What is the target market of your institution? All staff, especially field staff, should be able to clearly understand and to identify who the target market is, how to identify them and how to cater to their needs. There should be some follow up or monitoring to determine if an institution is reaching their target market, with adjustments made as necessary. For those MFI s with a focus on the poor, there is a further question concerning what specific poverty level they are targeting. Q: Are you meeting your social goals presently? This question aims to determine if an MFI: 1) has clear social goals; and, 2) if it knows how well it is achieving them. If so, then how do they know? Governance Social Performance Management logically begins at the top with effective Governance, which can be defined as a process by which a board of directors, through its management, guides an institution in fulfilling its corporate mission 15. Despite the fact that most microfinance institutions (MFIs) were established to reduce poverty and possess social missions, many are beginning to resemble traditional financial institutions. To expand their outreach and loan portfolios, they tap into commercial and quasicommercial sources of finance, which require them to demonstrate consistent profitability to their investors. Given this reality, and the risk of mission drift, a Board has to make sure that there is consistency between various aspects of its social mission and its activities. When assessing and/or managing social performance, an MFI should pay particular attention to three important factors: Q: Is there a diversity of backgrounds and expertise on your board? Critical to governance of any institution, board members should have diversified backgrounds and skills (financial, legal, business and social) in order to effectively guide an MFI. In a socially-oriented institution, it is also important that some members have a background and passion for social issues. If not, then an MFI needs to build its Board and further diversify its range of expertise and experience, all the while trying to maintain a balance among social and financial voices. At one MFI in southern India, there was a Board Member who never failed to bring up the client s perspective, for instance, when the 15 Jacobs, Ruth et al. Board Governance Training for MFIs Toolkit. MicroSave. August 2007

14 Social Performance Management Toolkit Manual 12 question of raising interest rates arose during Board meetings. These voices are critical to an MFI maintaining focus on meeting its double bottom-line. Q: Does your board monitor the achievement of mission s goals and objectives? To perform its oversight role effectively requires timely and credible information, not only on the financial aspects of performance, but social aspects as well. Social indicators must be woven into the management information and reporting systems (with requisite data collection) and may include crosscutting indicators like client dropout rate or staff retention, as well data on client outreach. This lets board members know if it is meeting client and staff needs or whether it is reaching its target market. Furthermore, if the organisation s mission is to improve the lives or incomes of women, data should be collected to determine if it is meeting that goal Q: Do your social objectives influence the setting of policy and strategic objectives at the board level? If you were to sit in on most board meetings at an MFI, you would here frequent talk of profitability, costs and efficiency, alongside other financial indicators - and very little about its social goals. Often times MFIs are actually capturing data on client households or other parameters but fail to process and analyse this information over time which simply requires adjusting the MIS. If an MFI has a social mission, then it is the responsibility of the Board to not only review information pertaining to its social performance, but to act on such information to revise/update policies and strategic objectives. One way to verify whether social objectives influence these areas is by reviewing board meeting minutes. Group Systems Attention should also be paid to governance matters at the client or group level, depending on the model of an MFI. In an SHG model, governance tends to be a critical issue. As the group-level operations are often led by members and for members, we should carefully observe if the MFI plays its role of a moderator and avoids any abuse of power or corruption. Q: Do all members participate in governance and normal operations of the self-help group? The MFI should provide mechanism not only to ensure its accountability to the JLG/SHG groups but also to ensure the accountability of group leaders to members. One way to avoid this is to impose regular rotation of group/centre/federation leadership through democratic mechanisms or any activities building capacity of groups. Q: Are members, or member representatives, involved or consulted in some way in the decision-making and management of your institution? As a representative model, one should check the effective involvement of the members representatives in the management decisions of the MFI. Some MFIs consult monthly with SHG leaders whereas others may include SHG members on the Board or an advisory committee. Understanding/Responsibility to Clients Responsibility to Clients Client Protection Client protection refers to a set of principles that should guide a financial institution serving low-income clients and include the following, as embraced by the Campaign for Client Protection in Microfinance 16 : Avoidance of Over-Indebtedness Transparent Pricing Appropriate Collections Practices Ethical Staff Behaviour 16

15 Social Performance Management Toolkit Manual 13 Mechanisms for Redress of Grievances. Privacy of Client Data Q: Do you have policies or practices designed to protect clients? An MFI should maintain the privacy of client data (for instance, from prying husbands or local politicians) unless they have permission otherwise. Likewise, policies or practices should be put in place to ensure proper treatment and a non-discrimination of the clients from your field staff. A code of conduct, signed by each loan officer might be used, as well as proper training and supervision of staff. Q: Do you take measures to ensure Client Protection? Clear instructions in the operations manual, well-informed and trained staff, as well as good supervision of staff demonstrate an MFI s desire to protect its clients. These measures should be backed up with interactions with clients and grievance policies to monitor actual adherence to client protection norms. Transparency and Communication Q: Are product terms and conditions, as well as the rights and responsibilities of clients, communicated to them in a way that illiterate clients can understand and remember? All documents and communication should be clear and, ideally, written in the local language, especially in receipts and passbooks for one. The loan officer must understand (and be incentivised accordingly) that ensuring clients understand the product and terms is just as important as disbursing the loan. This may include communicating everything in a simple, clear verbal manner to those clients who are illiterate. Q: Do you have a policy for supporting clients who face repayment difficulties due to factors outside of their control? One of the major risks in microfinance is an inability to pay due to illness, death or natural disaster. How an MFI handles clients in these circumstances may tell a lot about its social orientation. There needs to be a balance between maintaining credit discipline and working together with clients through things like insurance, an emergency fund, grace periods, advising and - in some cases - loan rescheduling. Q: Do you have a policy to help avoid and monitor over indebtedness? Over-indebtedness can be due to multiple borrowing (from formal and informal sources) or due to loan/instalments size poorly fitted to clients capacities, and can lead to tragic situations such as those that occurred in Andhra Pradesh recently. It is the responsibility of the MFI to avoid this situation and conduct a strict screening of the client as well as to create appropriate products. A client who can get a loan by simply filling up a form is not sufficient, even with a group guarantee in place. Policies may be devised that prohibit lending to those with multiple loans outstanding or insufficient income stream to support a new loan. If operational needs, capacity and/or the situational (and competitive) context permit, an income and cash-flow analysis is the best way to avoid client default and over-indebtedness. Improving Performance: Client feedback Regular Client feedback is the best way to ensure that an MFI does no harm and is part of the customer service culture an organisation should adopt for better social performances and transpose into effective processes, internal audit and training of staff. Q: Does your institution have client feedback and complaint mechanisms in place? Clients should be able to point out poor service, product and transaction issues, etc. An effective grievance mechanism not just a suggestions box in a branch office that no one ever uses- should be available. MFIs can provide a help line, give out the phone number of the branch manager, etc.

16 Social Performance Management Toolkit Manual 14 Cost of Services According to Chuck Waterfield, founder of MFTransparency.org, microfinance - though highly transparent in some areas has not been always consistent when it comes to accurately reporting the true costs of its services. Perhaps, this is due to complications of market conditions and lack of regulation, but the true price of loans, for instance, has rarely been accurately measured or reported. MFTransparency believes there is a need to present information on credit products and their prices in a clear and consistent fashion 17. Q: Do your clients know the interest rate they are paying for their loans? MFI prices will usually be higher than normal banks; however, it is important not to charge more than is necessary or pass on the costs of inefficiency unduly to the clients. This may be particularly relevant in areas with a charged political climate where local politicians, activists or religious leaders may seize on this as an example of an MFI charging usurious rates. So many times, when one asks a client how much does he/she pays for interest rates, fees, premiums, etc, he/she does not know the answer. Marketing materials and communication should give clients full information about the true costs they are paying for loans and transaction services, and how much they are receiving for savings. While all clients understand that paying a low interest rate on a loan is better, few can calculate the effective interest rate when factoring in a declining (rather than flat ) rate of interest, and associated fees such as loan origination charges, membership fees, compulsory loan insurance, etc. Client Services Special attention should be given to the lending methodology used by the MFI as well as the number, variety, and features of products it offers. An MFI is considered to be performing better from a social point of view when it offers a range of high quality financial products, including insurance and savings or flexible services (terms, size, grace period and top up loans)to its clients and not just credit. Understanding Client Needs Understanding clients needs (e.g. market research) is one of the most important ways an MFI can improve both its social and business performance. It helps to understand client needs and preferences, so as to better tailor products (types, terms) and services. In a competitive market, it is also a way to differentiate; while in a nascent one, it is a way to attract clients and deepen outreach. In any circumstance, understanding client needs should be built into an MFI s institutional culture and it will likely pay dividends in client retention, financial performance and growth. MicroSave s SPM approach draws from its Market Research for MFIs and Customer Service toolkits, including the following tools: ServQual/customer satisfaction surveys, Focus Group Discussions (FGDs), Drop-out FGDs/questionnaires, Product Attribute Ranking (PAR), Relative Preference Ranking (RPR) and Simple Wealth Ranking. MicroSave Resources: Market Research for Microfinance Institutions Customer Service Q: Has ways to understand Client Needs / Preferences This question is to understand the ways that MFIs learn from and understand their clients. While, formal market surveys may provide the most comprehensive feedback, most MFIs do not have the training or resources to conduct these on a regular basis. However, client feedback may be obtained in numerous 17

17 Social Performance Management Toolkit Manual 15 ways more informally, including: monthly/quarterly meetings with clients, feedback mechanisms like a drop box or phone line, informal client visits by supervisors, weekly/monthly debriefing with field staff about client issues. Q: How often does your institution use such means? In order for an institution to be truly attuned to client needs and preferences, and particularly in a competitive landscape, an MFI should obtain client feedback continually not as a one off or rare event. Q: Do you tailor your products to reflect those needs/preferences? As with most areas of Social Performance Management, it is not enough that information is being collected. It may actually be unproductive if so much data is captured about clients, but ends up gathering dust. Information pertaining to client needs and preferences should be used to inform key decisions in policy and strategy, and may eventually be utilised to further develop/tailor products (after a more indepth market analysis and product development process!) and services. MicroSave Resources Institutional and Product Development Risk Analysis Product Roll-out Client Outreach This section deals mainly with the way an MFI targets its clients. A precise and qualitative selection process is always valuable by helping an MFI reach the client it wants to reach per its mission statement. Collecting outreach data often involves (but is not mandatory) assessing the level of income or the standard of living of prospective clients during the application process. Here again, the alignment with the mission regarding the geographic targeting (rural/remote area, urban/slums) as well as the population targeting (low-income, entrepreneurs, active poor, etc.) is of strategic importance while appraising social performance. Q: Is there a clear selection process for geographic areas based on criteria that match your mission? Not all MFIs need target the poorest of the poor. Some may target rural or urban areas, some those living below the poverty line and others the vulnerable non-poor. What is important is that: 1) the target market matches with what is stated in your mission; and, 2) that client/geographic selection operational processes are aligned with successfully reaching this market. This will not only help an organisation to meet its mission, but become more efficient operationally. Q: Are you reaching who you think you are? The question follows, for senior management and even branch managers, as a way to understand how successfully they are reaching their target market and whether client composition reflects its mission. Do they periodically check client applications, monitor field staff s weekly planning, guide or train staff in outreach, or visit the field to meet clients and verify information? If not, then an MFI may not really know who they are reaching. At one small MFI in central India, field staff had a habit of ticking off the poor category on client application forms regardless of income levels, simply because management wanted to serve the poor. Client Retention Your client retention is your capacity to keep your clients after product cycles have concluded and depends mainly on the quality of your products and services and the level of service they receive. Happy clients obviously help the MFI s financial performance and sustainability in the long-run, but the retention rate, or inversely exit rate, can also be an important indicator of social performance. If clients are leaving an MFI s programme, then it is missing a chance to improve their well-being and serve their

18 Social Performance Management Toolkit Manual 16 true needs. Furthermore, seasoned clients taking bigger loans are more profitable from a financial standpoint - the cost of recruiting and training new clients is so much higher. For instance, Mibanco in Peru estimates that it takes four loan cycles to recover the cost of attracting a new client 18. Q: Do you calculate and report the exit/dropout rate? 19 Retention rate = active clients at the end of the period (active clients at the beginning of the period+ new clients) Dropout rate = 1- Retention Rate Source: Social Performance Standards Report, MIX Market Calculating and reporting client dropout rate can be an easy way to put client retention on the management dashboard. Furthermore, conducting Exit Surveys might be very useful particularly when client dropout spikes during a particular month or at a particular branch. By monitoring who is leaving the programme and the reasons why, one can better adjust products and services to retain the bulk of the MFI s clients and can also give MFIs a sense of how well staff is treating its customers! Alignment of Strategy and Systems Strategic Business Planning (SBP) The SBP process should ensure that social as well as financial aspects and objectives are covered. This is the key document that reemphasizes the mission and vision of the MFIand, as such, forms the base of our analysis. The mission should contain social concepts, and the business plan, through its key objectives, should aim to fulfil the mission s stated goals. Every MFI has a different mission, and therefore, the social performance analysis (and the tools to be used) will be different. For instance, for an MFI targeting the poor, Poverty Wealth Ranking may be used, whereas for an MFI targeting women and aiming to empower them, the Empowerment Focus Group Discussion may be used. Q: Do you set targets based on social objectives? The business plan should help the MFI act on the mission by setting objectives and determining measures to achieve it. To probe this question, it is necessary to examine the KOGMA 20 of the MFI. The MFI s KOGMA should reflect the social objectives of the mission statement. If no social objectives are established yet, a review of the SBP should be included in the SPM Action Plan (Day 5). Q: Is performance against your social objectives monitored? Setting objectives is one thing, monitoring their actual implementation and results is a far more difficult to do. If performance is being measured, it demonstrates that the MFI already has a strong social focus. However, equally importantly is what is done with the monitoring of social performance or of achievement of its social objectives. This information should not sit on a desk, but rather it should be used 18 Campion et al. Putting the social into performance management. Imp-Act/IDS Note: A drop-out is any client who has had no transaction with the MFI for the last 6 months. Technical Note #1: Estimating Client Exit Rate. M-CRIL KOGMA: stands for Key Objectives, Goals, Measures/targets and Activities which together provide a clear, simple framework for he implementation of your Strategy. From MicroSave s Strategic Business Planning for Market-led Financial Institutions Toolkit

19 Social Performance Management Toolkit Manual 17 to inform key decisions, form an integral part of regular reporting, and adjustments should be made if performance is off target. Human Resource Management Human Resource Management (HRM) tools and systems are critical in finding, training, managing, motivating, and developing a team of staff who will effectively carry out an MFI s mission. By building strong, well functioning human resource systems and tools, your institution will be poised for growth, ready to manage the challenges of an evolving environment, and responsive to the needs of your clients. 21 All employees, regardless of their position in your MFI, need the same things to be successful. Everyone needs to: 1. Identify with your MFI s mission 2. Understand their role, and how that contributes to the mission 3. Know specifically what is expected of them 4. Have the capacity, resources, and environment that make success possible 5. Receive encouragement, constructive feedback, and opportunities to develop and improve The job of the Human Resources Department is to implement systems and tools that will provide these key elements to help the individuals within your MFI to be highly motivated and successful. In addition to mission fulfilment and keeping employees happy, this will ultimately contribute to improved efficiency, productivity and ultimately reduced costs. Q: Does your induction / training include an emphasis on mission and social performance? An MFI s staff members are the face of the organisation to clients and should mirror the MFI s values. A social mission reiterated during induction, trainings, and staff communication help to create a strong social performance culture in the MFI and encourage staff to ingrain this culture in their behaviour. Q: On which areas of social performance does training focus? If social performance is important to the MFI, then beyond an organisation s mission and values, training may be designed to include modules on how to prevent client over-indebtedness, clear communication in pricing and terms, and proper treatment of clients. Q: Do your institution's staff performance appraisals of staff relate to social objectives? In order to ensure that staff are following an organisation s social objectives and enacting them in the field, staff performance appraisals should include such categories (e.g. reaching the rural poor, providing client-friendly services). This gives a signal to staff that they are being measured in these areas and should work towards those goals and objectives as part of their day-to-day activities. Q: Does your institution have in place a staff incentives scheme related to its social objectives? In the same way, an organisation s staff incentives should be well aligned with its mission. Many MFIs reward staff for client outreach (number of new clients) or portfolio size (or interest income), but may also wish to consider social parameters (customer satisfaction) or at least client retention (or total number of clients) as a way to ensure strong social performance alongside financial performance. Management Information Systems An MFI s management information system is the lifeline of effective management. Because good information is essential for the institution to perform in an efficient and effective manner - the better the information, the better the institution can manage its resources 22. An MFI should design and/or adapt its 21 MicroSave/MEDA. Human Resource Management Toolkit Prakash, L.B. et Babu, S. Management Information Systems A Practical Toolkit. MicroSave. 2008

20 Social Performance Management Toolkit Manual 18 MIS to collect and report on those indicators of value to stakeholders and that match the institution s overall mission. While oftentimes MFIs are reporting on key financial parameters - client outreach, portfolio at risk, portfolio outstanding, etc. social indicators which are linked to the mission are rarely included in management reports. This has large implications, for if an MFI s senior management lacks timely information then it cannot monitor achievement its mission. Social performance management involves including social indicators in management s dashboard (or MIS and reporting systems) to allow them to make informed decisions. Q: Does your MIS contain social indicators linked to your mission? An organisation s MIS should be aligned with its mission and strategic plan. Possible indicators will vary depending on the mission and region, but may include: Client dropout/retention statistics Client and staff satisfaction levels Outreach: Analysis by region poorer or underserved districts Usage of products and services by client demographic categories, such as women, poor, entrepreneurs Income or socio-economic level (if part of mission) Delinquency analysis by client type, industry, region, etc. Client outcomes such as client poverty assessment and/or trends out of poverty Women s empowerment (or # of women accessing health services, engaged in community activities, etc.) Q: Is social data properly analysed and used in decision-making? In many cases, an MFI may actually be gathering client level data on socio-economic status during the intake or loan application stage. However, the data is usually left idle, even if entered into the MIS. Adjusting the MIS s technical parameters to enable analysis of these parameters can be relatively easy. For social performance management, one must follow the same process as when they are designing an MIS: interviewing key stakeholders, determining what information is needed, deciding at what frequency it should be reported; and collecting the necessary data. What is critical is that the information is properly analysed and actually informs decision-making. Some additional questions on MIS may be: Are reports covering SPM readily available, even at the field level? Are the reports available based on institutional-wide, regional, branch and staff member levels? Internal Audit and Controls Although the domain of internal audit and control in microfinance has typically placed an emphasis on financial control and associated risks, mechanisms to oversee and protect an organisation s social objectives and values is equally important to an organisation s reputation and long-term sustainability 23. Having internal controls in place relative to SPM can be evidenced in the following key areas: Client Protection: Proper internal controls play a key role in ensuring strong mechanisms for client protection. Auditors or Supervisors should ensure that client documents are complete and up to date, that clients are aware of product and service terms and conditions, client privacy is maintained, and that no frauds are being committed by field staff or group leaders 23 Campion et al. Putting the social into performance management. Imp-Act/IDS. 2008

21 Social Performance Management Toolkit Manual 19 Timeliness of loan disbursement: Likewise, monitoring the timeliness of loan disbursement through talking to clients or reviewing loan documentation at the branch is another key aspect of internal controls Proper treatment of clients: Just as an Internal Auditors and Supervisors ensure adherence to key processes and procedures, they should also pay close attention to proper treatment of clients. Appropriate behaviour with clients can be included in the code of conduct, but may also form a part of training (through role plays, etc.). This includes how to treat clients who are delinquent or absent to meetings areas where pressure from senior management to meet targets may leave room for abusive behaviour. Treatment of clients may be monitored through field visits and talking to clients, but also may be checked if a functioning client feedback and grievance mechanism is in place at the MFI. Social Audits: Finally, an organisation may wish to do periodic social audits, ratings, or SPM visits (done either themselves or through outside consultants) or integrate a robust social audit into regular internal audit and control systems. This may include verifying the accuracy of data on client outreach, poverty levels, impact or any other relevant indicators. Q: Are social objectives and criteria integrated into the institution s internal audit and control system? By integrating social criteria into an internal control system, not only does this help an organisation manage social risk (or the risk of not adhering to its mission) but helps institutionalise social performance management across core systems. Critical to integration is that findings are not only included in internal audit/control reports, but that changes and follow up is done to ensure implementation. Understanding/Responsibility to Staff Responsibility to Staff Q: Do you have a clear HR policy to ensure fair and equal treatment of staff? First of all, the HR Policy should be clear and fair. An MFI should maintain and truly implement its HR manual as a fundamental first step. It (or at least relevant portions of it) should be readily available for all employees, in the relevant vernacular language. HR policy should also ensure all staff have an exhaustive and detailed job profile, including social responsibilities and goals to help the MFI meet its mission Q: Do you have a clear salary scale that reflects competitive or market rates? Q: Does your institution provide staff with a full range of benefits (that truly provide benefit to your employees)? Competitive salaries (for the marketplace and/or sector) and benefits are the minimum expectation an MFI should address to take care of its employees. These steps help ensure staff retention (one of the most difficult and costly challenges facing MFIs) and may also lead to higher staff performance levels. Many MFIs in India in particular provide housing benefits ; however, much of what is on offer is crowded and sub-standard. Benefits that attract and retain staff may include things from health insurance, provident fund/pension, vehicle allowances, staff personal/vehicle loans and other non-financial benefits (staff picnic, awards, etc.). Q: Are there clear policies for staff development (training plan, performance reviews, promotions)? A performance appraisal and promotion policy aligned with your social objectives, is a good way to boost staff efficiency as well as social performance. Ideally, a staff incentives scheme based on social indicators is the best way to entertain a corporate culture around social performances. Staff Feedback Ensuring that staff can give inputs and have a voice in the MFI, and that their problems and concerns are taken seriously, should be given due importance at an MFI and are assessed as part of an SPM visit. By

22 Social Performance Management Toolkit Manual 20 monitoring employee satisfaction, implementing a grievance procedure, and monitoring staff turnover, and MFI can help to retain and motivate its employees thereby improving business as well. Q: Do you have a grievance process in place to allow employees to report any misbehaviour in a nonthreatening, anonymous way, such as for cases of sexual harassment? It is important to have a fair and functioning grievance mechanism for staff. This shows them that problems need not fester, but can be resolved equitably at the organisation. There should be clear procedures on who to approach, as well as ways to go around an offending party (such a supervisor) to report an incident to a higher authority or even anonymously if necessary. Q: Do you monitor employee satisfaction on a regular basis? How often do staff members receive feedback and performance reviews? One of the best ways of gathering feedback from staff is through regular staff satisfaction surveys. Staff Satisfaction Surveys on a regular basis, an MFI can: Assess the level of satisfaction of your employee Convey the message that they being listened to Get constructive feedback and suggestions Such surveys take a barometer of staff feeling, and adding open ended questions may allow them to pinpoint problem (or success!) areas. Likewise, staff themselves often want to understand how well they are performing, what they do well and what they need help on. That is why regular staff performance reviews are important to an MFI s ability to be responsible to its staff. Again, it s not enough to merely collect such feedback/information. Senior management must take action based on any issues include increasing positives and decreasing negatives in order to use such information effectively and make the staff feel that their opinions are truly valid. Q: Does your institution monitor staff turnover rates? High staff turnover can negatively impact an MFI s operational costs and sustainability. Staff turnover rates thus offer a glimpse into how well an MFI is treating their staff and/or whether or not it is hiring the right people for its positions. By keeping track of staff turnover for instance, in monthly reports MFI senior management can quickly catch any abnormal movements and investigate/fix them (possibly by using a staff satisfaction survey or analysis of exit interviews) Q: Do you regularly perform exit interviews with departing staff? Exit Surveys can provide useful information about your organisation when an employee leaves the MFI for any reason and it becomes urgent particularly when staff dropout levels are abnormally high. Exit surveys can help the MFI: Have a clear diagnostic of what went wrong (or not) Take measures to correct/improve certain practices Avoid the situation happening again Other Key Categories Gender Approach/Non-discrimination For those whose mission focuses on women, or whose clientele is predominantly women, it is important to consider the gender policies and/or practices of the MFI. For instance, some MFIs ensure women s rights to apply for and take on loans independently of their husbands or apply zero tolerance policies for sexual harassment. Equally as MFI s often focus on those excluded from formal financial non-discrimination is often another key area to assess during an SPM intervention. However, as not all institutions have an exclusive focus on women, it is not a mandatory field in the MicroSave SPM toolkit.

23 Social Performance Management Toolkit Manual 21 Q: Do you have any gender policies/strategies to address gender inequality in your institution? Gender equality and non-discrimination policies and practices towards staff should address not only the organisation s hiring/recruiting, but also equal pay, training, promotion. These should be open to all, male or female, and not be discriminatory based on caste, class, religion, tribe, sexual orientation or other criteria. Likewise, there should be equal access to management and board positions, and no tolerance for any form of sexual harassment. For instance, if most of the middle and senior management posts are held by men and your MFI serves women clients, you may not have a strong policy of promotion and advancement catered to everyone, regardless of gender. Q: Do you have any policies/strategies to address gender inequality in society? Gender equality and non-discrimination policies and practices is also very relevant when it comes to treatment and outreach to clients. An MFI can reinforce its values by appropriate client targeting (what time of day are meetings held and is this convenient for women or outside of times for household duties?), products (unsecured loans backed by group guarantee, school or house loans, emergency or consumption loans, Islamic products, etc.) or methodology (e.g. group-based may be appropriate in some cultural contexts, women loan officers in others). Non-financial Services Some MFIs provide a variety of additional services to enhance the provision of financial services and help bring people out of poverty or exclusion. These are not a mandatory aspect of MicroSave s SPM diagnostic, nor should MFIs necessarily try to do anything other than provide financial services, but it may showcase an MFI s attention to its social objectives. The key to assessing such services is that they are in line with the overall mission and objectives of the MFI. Q: Does your institution offer any non-financial services to meet clients other needs? The MFI may choose to provide non-financial services directly, through an affiliate, or through a third party if the MFI feels that it does not have the capacity and that it should not overlap other service providers. These services can include the following: Education: trainings dispensed by the MFI to increase the skills of its borrowers, sometimes integrated in a value-chain project (e.g. sewing courses, etc.) Health services: nursing and hospital services Business development: helping the borrower to run a sustainable business Women s empowerment through social activities and trainings General empowerment programs of the poor and excluded, e.g. lower caste groups/tribals It may be good to ask, if an organisation is providing such services, whether it is achieving maximum leverage for the resources that are being utilised in these programmes. Client Impact This section deals with how the services of an MFI may affect or benefit its clients in tangible ways, through the asking of such questions as: Are you making an impact on client households and livelihoods? Are clients lives improving or leaving poverty behind? Are they becoming empowered? Are more children in school? Q: Does your institution track the changes in poverty (or any other socio-economic outcomes) over time in its clients? Again, the MFI s own mission will dictate what is set as objectives for impact and what should therefore be measured or monitored. True impact assessment requires preliminary work whereby the MFI collects all the baseline information that will subsequently allow monitoring of the evolution and appraisal of the changes against this baseline. Often, measuring impact depends on the efficiency of the MFI s targeting BEWARE! There is much evidence that impact studies and client tracking are fraught with issues and often inconclusive. An MFI may want to let the clients define impact rather than use an academic, quantitative approach based on assumptions made in an office rather than in the field.

24 Social Performance Management Toolkit Manual 22 policy: a rigorous quantitative and qualitative client screening will help the MFI to evaluate properly impact further on. Responsibility toward Community & Environment Responsibility towards both Community and the Environment is fast becoming a norm across the social performance industry. Although not considered mandatory, MicroSave has included it as a possible measurement in its SPM toolkit. Because the borrower is himself/herself involved in a larger community, the MFI should remember that all of its activities have an impact on the whole community. Likewise, the environment may be affected by those activities undertaken by an MFI. Remember: Community and Environment activities should be aligned with the MFI s mission and institutional capacity. The MFI cannot fix all the world s problems but can work with other organisations to accomplish tasks beyond its own capacity. Q: Do you have a policy for responsibility to the community? Or undertake other activities or initiatives that benefit the community? Responsibility to the community may take the shape of a lending policy prohibiting compromising or damaging activities, such as child labour, liquor business, etc., or may also take the shape of sponsoring activities that give benefit to the community (sponsored community events, health clinics, etc.). Q: Do you have a formal/informal policy for responsibility to the environment for the type of client enterprises/activities for which you give loans or internally, how you manage your resources? Responsibility to the environment is applicable to those organisations that consider microfinance as a Triple Bottom Line activity that has financial, social and environmental objectives. Although loan utilisation can be difficult to monitor accurately, an MFI can protect the environment by monitoring the kind of client businesses it funds (e.g. prohibiting activities that pollute and promote eco-friendly activity). Likewise, it may become more environmentally-friendly by internally undertaking green practices (e.g. conserving water/electricity, using clean/solar energy).

25 Social Performance Management Toolkit Manual 23 III. Preliminary Work: Determining the Role of Social Performance Management in an MFI s Institutional Strategy Creating a Socially Performing Institution? 24 There are several steps that can be taken to ensure alignment between your Mission, Vision and Values and the MFI s actual social performance: 25 Have senior management articulate the SPM Policy: The role played by senior management in creating and maintaining a social performance culture within a financial institution is critical. The importance that management places with social performance is quickly telegraphed throughout an institution. Thus, management should articulate the role and importance of Social Performance Management in what they say and in what they do. This means developing and communicating social performance strategies and maintaining mechanisms for listening to both clients and staff. Involve different levels of staff: All levels of staff are ultimately involved in producing responsive and responsible financial services, directly or indirectly. Therefore, all staff should have mechanisms for contributing to the development of the SPM Strategy and mechanisms for providing feedback on the Social Performance. Have SMART objectives: Focus the strategy on Specific, Measurable, Achievable, Realistic, Time-bound (or Track-able) objectives. Hold people responsible for achieving those objectives: If everyone in your institution is supposed to be responsible for social performance, make sure your performance appraisal and reward systems are designed to hold everyone accountable for their contributions to social performance. This can go beyond mere individual performance to include the signalling of problems and the identification of solutions. Build on existing capacity: Few financial institutions have the capacity they need to implement an efficient SPM strategy, especially when they are still in a growing phase. By necessity, financial institutions need to build gradually. Their strategy needs to be grounded on a realistic assessment of current capabilities and capacity will need to be grown as required to create better alignment. Nurture an institutional culture: The culture of the institution needs to be shaped and nurtured so that it embodies an appropriate social performance attitude and approach. This can be especially challenging for financial institutions which have grown quickly. Put commitments in writing: It is very necessary that the senior management commitments relating to social performance should be placed in writing. 24 Adapted from Campion et al. Putting the social into performance management. Imp-Act/IDS Adapted from MicroSave s Customer Service Toolkit Manual.

26 Social Performance Management Toolkit Manual 24 Considering the MFI Expectations and Wishes 1. Preliminary call Since every organisation has a specific mission, the social performance management strategy of each MFI will be different. MicroSave s SPM toolkit takes this into consideration and every visit starts with at least one preliminary call with the CEO. This call aims first to present the objectives of the Toolkit and then, to consider the MFI s vision of SPM. This will be strengthened later during the informal discussion surrounding your introductory presentation on Day 1 of the assignment. Keep in mind that the SPM visit requires the attention of every key member of the MFI. Choose a date during which maximum of people are available, especially the management and a few board members. Remember that Social Performance Management begins at the top. So, the team needs the CEO s support during the week to facilitate access to all the information requested. The team will also need to meet the board, senior managers, branch managers and field staff. Avoid weeks preceding big team meetings, meetings with bankers or founders as well as the training weeks. This call should also include a request of all the strategic documentation for the audit : Strategic Business Plan, Operations Manual, HR Manual and any other useful document (see in section IV.A.2.). The team should also submit the Staff Satisfaction Survey to the CEO or HR manager at this time, which will need to be translated into the language of the institution and administered to every staff anonymously (i.e. without writing names on the survey to allow staff to express themselves freely) prior to the visit. 2. Informal discussion The introduction presentation held on Day 1 of the visit often generates lots of discussion and is the perfect moment to confirm the expectations of the management into account. If the participants are proactive, they will already have a myriad of requests and ideas which should be your priority and area of focus during the coming week. If not, the team s role is to lead the discussion to some strategic points relevant with the organisation s mission. Assembling a Social Performance Management Team After the introduction presentation on Day 1 has been done and the objectives of the visit determined, MicroSave will need to create an SPM team composed of MicroSave s technical staff and two to three of the MFI s employees who will participate during the visit, coordinate the entire field visit and local language interpreter as needed. Ideally, this person can be the Operations Manager, the Area Manager or HR manager.

27 Social Performance Management Toolkit Manual 25 IV. The Process: Diagnosis and Analysis Auditing Internal Documentation One of the first steps in diagnosing how well an institution s social objectives are included in its management systems is by reviewing its internal documentation, existing written policies and the actual systems themselves. Often times, much of this work can be done off site (if externally reviewed) and ahead of time by requesting and reviewing documents and policy manuals before arriving at the institution. The core of the SPM toolkit revolves around reviewing the following critical systems. It begins with the Strategic Business Plan (the vision which lays out key goals and objectives of an institution) and moves into Operations (how these plans are operationalised), Human Resource Management (how well staff are directed and managed towards achievement of key goals), and the Management Information System (what data is collected and analysed in order to take decisions). 1. Key Systems Strategic Business Plan: (Mission Clarity, Alignment of Strategies and Systems, Outreach, Services, Responsibility to Client) The SBP is a key guiding and management document for any institution. It should be reviewed with an aim to clarify the direction of the organisation, and to determine if the mission is reflected in the setting of organisational goals, objectives, strategy and activities. Clear indicators and targets in the SBP may reflect a desire to measure the achievement of the mission. Likewise, an institutions mission can be evaluated on how well it balances the social and financial goals. If the objectives are strictly financial, but the MFI also has a social objective, then the guiding system is not properly aligned. To realise any goal, a plan should clearly articulate the objective, the activities necessary to accomplish it, persons responsible, and the targets. Then, these need to be measured, monitored and made a part of the management feedback loop and decision making. Human Resources- HR Manual / Training materials: (Systems Alignment, Responsibility to Staff) Human Resource Management is central to an MFI s ability to mobilise its resources effectively. An organisation s employees are the face of the organisation, and retaining them (and keeping them happy and motivated) is a key part of effective service to clients. Not only must staff be treated properly, but they must also understand the organisation s mission and social goals as well as their own roles and responsibilities in achieving these objectives. HR,in the context of social performance, encompasses recruitment and hiring, HR policies, salary and benefits, performance appraisal and incentives, and employee exits. Some of this information can be gathered from documents, e.g. the HR Manual or policy documents or any other staff training material (induction, etc.) or appraisal/performance review (templates and completed). The objective is primarily to see if employee hiring (staff selection), training (induction and ongoing) and performance review, as well as staff incentives, are aligned with mission and social objectives or not. For example, an MFI that has social objectives may wish to cover the objectives in its orientation training (e.g. a focus on mission, vision and values; proper treatment of clients). Likewise, they

28 Social Performance Management Toolkit Manual 26 may also wish to include social criteria (e.g. customer service) in the appraisal and incentive systems, rather than just the financial targets (e.g. number of new clients, portfolio outstanding, PAR, etc.). To further assess how an institution fares in its responsibility to staff, one may also review: job descriptions (what aspects of the job are emphasised), staff development / promotion policy (what opportunities for growth are given to staff), salary and benefits (how the MFI fares vis-a-vis its competition), and documents that show how effective are feedback and grievance mechanisms (if relevant). Operations Manual: (Responsibility to Clients, Services, Outreach) The Operations Manual is critical for two reasons: 1) to understand the MFI better (for external evaluators) and 2) to study the specifics around products and services, treatment of clients, delinquency management, and of course - loan processes. The SPM team looks at the Operations Manual to better understand the client targeting strategy along with village/area selection. This can then be cross-checked during field visits and audits. For instance, if the target clientele is low income women living in rural areas, and the clients one visits have higher incomes and many are living in urban or suburban areas, then the alignment is off. An MFI may wish to redefine its target clientele or reassert its targeting strategy through a combination of monitoring and incentives. The Operations Manual can also give insight into the presence (or lack) of clear, standardised systems and processes for efficient service to clients. For example, it can be useful to determine time/steps from application to disbursement in should be processes, and then cross-check this with client feedback in the field. Furthermore, the SPM Team should look into whether or not there are policies for proper conduct with clients, delinquency management, communication of terms and conditions, and whether there are receipts or signatures in passbooks for all transactions. This, when corroborated by field visits, can represent an MFI s responsibility to its clients. Management Information System (MIS)(Alignment of Strategies and Systems): An effective MIS is key to monitoring both the social and financial progress of an organisation over time. It should also provide information related to the achievement of the MFI s key strategic goals and objectives. The SPM team should examine the MIS to determine: what information is being tracked and reported on a regular basis, and whether this matches with what is articulated in the mission and SBP. This will also help to determine if social, or only financial, information is being analysed and used to inform management decisions. Typically, the MIS may include data entered from loan applications on outreach (characteristics of clients), but may not have this data in an analysable form and is not used in decision-making regardless. Likewise, while measuring impact (changes in characteristics over time) may be a desirable element in the MIS of an institution that aims to improve the status of its clients, it is not the only way to integrate social objectives into its MIS. Other indicators that may be relevant, depending on the context, can be: client dropout rates, staff retention rates, scores on client/staff satisfaction surveys, effective (true) interest rates, geographical or caste distinctions, percentage of female borrowers, etc. Overall, the MIS should be analysed to assess not just which data is being collected and not used but also, which may be useful to improving services. It can also identify the data that is necessary to understand clients and improve performance. Finally, if there is time, it could be useful to determine if information is accurate and transparent for reporting to funders and other stakeholders.

29 Social Performance Management Toolkit Manual Other Relevant Documents The following list of documents, policies and systems are also reviewed as part of a social performance management visit to the extent that time is available and comprehensiveness desired. Each, where available, can give insight into the social performance of the institution and can be used to triangulate (or cross-check ) data given by senior managers and staff during interviews and focus groups. Articles / Bylaws (Mission Clarity, Governance): To see if the objectives and activities of the organisation make specific reference to the organisation s social mission. Board Meeting Minutes (Alignment of Strategy and Systems, Mission Clarity, Governance): To understand strategic management and direction of organisation (e.g. the Board s commitment to its mission and if any decisions are taken based on a concern for meeting social goals particularly those expressed in the mission). Credit Meeting/SMT/Branch meetings: (Mission Clarity, Alignment of Strategy and Systems, Outreach, Responsibility to Client) To see which credit committee/branch/smt decisions are taken regarding social categories/indicators; to determine consideration of targeting and outreach strategies; and, to ensure that clients are taking an appropriate amount and are not over-indebted. Loan Documents (eg. member enrolment/application forms, passbook, receipts, registers) (Alignment of Strategies and Systems, Responsibility to Client, Responsibility to Environment/Community, Outreach): To determine if the client profile matches matches the one expressed in an organisation s mission and its client targeting strategy; to assess the financing requirements and community/environmental impact of business activities; to ensure clients are getting proper documentation of transactions, that such documentation is consistent, signed, upto-date and cross-checked by a supervisor; to ensure that documentation is complete and accurate so that there are less opportunities for fraud or errors. 3. Systems Internal Audit and Control Systems (Responsibility to Clients, Alignment of Strategy and Systems): To determine if there is an internal audit and control system (even if informal eg. composed of cross-checking and random visits, client grievance channels) in place to ensure that no fraud is occurring and clients are protected. The presence of some sort of control or process monitoring system may also help ensure improved adherence to standard processes, system functioning, client protection and thus, professional and customer-friendly service delivery. Assessing Current Performance 1. SPM Diagnostic Head Office The process of doing an SPM diagnostic on-site begins with determining who are the key stakeholders (typically, the senior management team and Board, but also staff, clients and community members) and meeting with them at the head office. Although the SPM team actually begins its diagnostic off-site through documentation, the SPM presentation on Day 1 can be a useful way through informal discussions to gather further insights into the social performance of an institution. This may occur during discussions around what Social Performance or Social Performance Management is or what it means to the organisation, or while speaking of its mission, social objectives and strategic planning.

30 Social Performance Management Toolkit Manual 28 However, the main technique that MicroSave s SPM team utilises is a one-on-one interview. (See SPM Guide to Tools for Interview Guides) Alternatively, if the stakeholders present during the introductory meeting and presentation have the time to spend, then a group-style interview may be possible. Otherwise, to minimise the time each key person must spend, one can schedule short minute interviews with each person separately. These are designed to provide answers to the questions/indicators listed in the SPM questionnaire. Therefore, it is critical to review and be well-versed in the questionnaire, so as to be able to lead an interview in a more conversational manner. Oftentimes, particularly if you are reading from an interview guide, staff may feel nervous as if an exam or rating is occurring. The spirit of an SPM diagnostic should be one of collaboration, in such a manner so as to better identify methods of improving social performance management of the institution. If there is time, community members may also be interviewed. Board Member: Interviewing 1 or 2 board members (particularly the Chairman and/or members of the executive committee) provides an opportunity to learn about the role of its mission and social objectives in an institution s governance, as well as other key stakeholders. Beginning with how the member understands the mission and purpose of the organisation, the interview proceeds to questions related to: diversity of the members and expertise on the Board, frequency of meetings, board committees (e.g. is there a social performance or client committee?), how they monitor achievement of mission and implementation of the strategic business plan, which data/information that the Board reviews, and finally examples of how mission/social objectives influences the Board s guidance, setting of policy and strategic decision-making (e.g. through discussions held or examples of decisions taken on SPM areas like responsibility to client, staff, etc.). CEO: The interview with the CEO or Microfinance Managing Director is focused on similar areas. It begins with an understanding of mission, communication of that mission across the organisation and any specific social objectives and target clientele/market. The discussion should also cover on governance, monitoring achievement of mission/social objectives, and examples where these factors have influences decision-making at the senior level. The interview reviews strategic business planning (setting of goals and monitoring), and briefly touches upon HR and MIS issues (alignment of systems to the mission/social objectives). The team should also discuss clients eg. market research, responsibility to clients, etc. Operations Manager: The interview with the Operations Manager is much more wide-ranging in scope, dealing more with the operational policies and practices. It covers topics related to mission clarity and systems alignment (training, performance appraisal, MIS) but then moves into topics related to services and products, target clientele, communications with clients, staff performance and appraisal, grievance and feedback mechanisms for staff and clients, HR policies, client protection/internal control practices and market research. HR Manager: The HR Manager is interviewed to triangulate with the policies and practices described in the organisation s Human Resources handbook or manual. As such, most of the queries pertain to those contained in alignment of systems (HR) and responsibility of staff (salaries and benefits, performance appraisal, communication of policies, incentives, staff training and advancement, etc.). It provides a good opportunity to follow up and review documents such as completed appraisal forms or training materials. The interview should also involve discussing the preliminary results from the staff satisfaction survey, if available. MIS Manager: The interview with the MIS Manager revolves primarily around alignment of systems (MIS). Specifically, the SPM Team should look into the MIS at what data is collected, what is analysed and what is reported regularly with an aim of determining what social objectives or mission-related items are contained within.

31 Social Performance Management Toolkit Manual SPM Diagnostic - Branch In order to assess current social performance management and to better understand the difference between policies and procedures, or spoken of by senior management in the head office ( Should-Be ), and what is actually occurring in the field ( As-Is ), branch visits are essential. MicroSave s SPM team spends at least two and a half days meeting and talking to staff at the MFIs branch offices. Given time and distance limitations, teams are typically limited to visiting usually 2 or 3 branches. Branches may include the head office branch (if such exists), and possibly 1-2 others during the next two days, respectively. This may be altered and adapted depending on the information most needed by the MFI. There are three basic techniques that MicroSave s SPM Team uses to collect branch level information: 1. A Discussion Guide-driven FGD: Written discussion guide prepared in advance 2. Surveys and Questionnaires: Surveys and questionnaires that staff can fill out themselves 3. Review of Loan Documents / MIS: Review of loan documents and branch level MIS (see above) Branch Manager Interview with Branch Manager: The Interview with the Branch Manager is designed to help complete the SPM diagnostic by looking at different levels across the organisation. First, the discussion aims to assess how well the Branch Manager understands the mission of the organisation. Secondly, it is also useful for understanding a mid-level, supervisory perspective on how the branch fares in terms of its responsibility to staff and clients. For example, for client-related issues, the interview questions concern how the Branch Manager verifies: proper treatment of clients during collections and delinquency management; if the code of conduct is enforced; effective communication of terms and conditions; prevention of fraud through systems and internal audit & control mechanisms; if there is a client grievance or feedback system, how it functions and what are the common client inputs; and, proper client targeting and prevention of over-indebtedness. For staff-related issues, the interview questions cover regularity and design of performance appraisal, feedback and grievance systems, staff satisfaction levels, why staff leave, and so forth. (See SPM Guide to Tools for Branch Manager Interview questions) Staff Focus Group Discussion (FGD) SPM Staff Focus Group Discussion: This focus group discussion guide is designed to complement the SPM staff satisfaction questionnaire. It essentially aims to triangulate data received at Head Office through documents, systems or interviews with senior management. The discussion cross-checks staff s understanding and acceptance of the mission, as well as a range of policies and practices that reflect the MFI s responsibility to its staff: their knowledge of job responsibilities, familiarity with HR policies, training content and frequency, performance appraisals, advancement opportunities, opinions about the competitiveness of salary and benefits, as well as any other issues that arise in Staff Satisfaction Surveys. Likewise, the guide aims to cross-check operational practices relating to responsibility to clients: communication of product/service terms and conditions, existence of a code of conduct, protocol

32 Social Performance Management Toolkit Manual 30 for delinquency management, prevention of over-indebtedness, client feedback needs and preferences. Survey Tools Staff Satisfaction Survey: Surveys should be administered to staff, collected and analysed prior to arrival of the SPM team to the branch. This will allow the team to pinpoint any recurrent issues which can then be explored during the FGD. (See SPM Guide to Tools for Staff Satisfaction Survey) The survey is a simple-to-administer survey designed to evaluate levels of staff satisfaction across the organisation and can be grouped and analysed according to branch, support or field staff, or aggregated for a total picture. MFIs may wish to utilise the survey, in a modified form, periodically (e.g. quarterly, every 6 months) to take the pulse of the organisation. This can be a useful way to address any issues before staff members decide to leave the organisation costing an MFI valuable time, money and investment. The overall goal of the survey is: 1. To learn what is working well at the organisation, and what could be improved; 2. To understand the current staff morale and attitudes; 3. To shape policies and initiatives for the next fiscal year; 4. To present an opportunity for staff to give anonymous feedback Before taking the survey, the SPM Team or administrator should take care to emphasise its strictly confidential and anonymous nature and that staff should respond freely. The team should explain that the organisation seeks to know more about what it is doing well and what it is not doing well with an aim of addressing any issues and making the workplace more satisfying for staff. 3. Social Performance Diagnostic - Clients One of the most important elements of MicroSave s approach to social performance management is its emphasis on clients. Most MFIs lack a structured mechanism for collecting and analysing qualitative client data. However, understanding your clients, and maintaining high levels of customer service are two of the most important elements of maintaining high social and financial performance. When clients have access to appropriate products and customer-friendly service delivery, they are more likely to remain with an MFI over subsequent loan cycles. Client retention is one of the most effective means of lowering costs and improving profitability. MicroSave can help your institution design specific tools that are appropriate for different institutions and contexts. For example, it helped one MFI in south India develop stress test tools to determine the relative health of its self-help groups. Field visits are also an important means by which the SPM team may better understand the difference between policies or spoken of by both the management and staff ( Should-Be ), and what is actually happening in the field ( As-Is ). MicroSave s SPM Team spends at least 2 - to - 2 1/2 days of its 5-day visit meeting and talking to clients. Given time and distance limitations, teams are typically limited to visiting 4-6 groups and 3-5 dropout clients at 2-3 branches. This may be altered and adapted depending on the information most needed by the MFI in question (e.g. dropouts, groups with high delinquency), and whether or not a recent SPM diagnostic was already performed in which case, more attention can be given to field visits.

33 Social Performance Management Toolkit Manual 31 There are two basic techniques that MicroSave s SPM Team uses to collect information: 1. A Discussion Guide-driven FGD: Written discussion guide prepared in advance 2. A PRA Method: The discussion is driven by the PRA or survey tool (e.g. wealth ranking, relative preference ranking, ServQual) 3. Survey and Questionnaires: This is a simpler form of data collection but requires extra time and proper explanation of how to complete them properly. Some Questions You May Want Answers To Although the objectives of client visits may vary according to what is most important to an institution, the SPM diagnostic typically focuses on the following range of questions: Client Feedback Who are the clients, their characteristics, activities and socio-economic status? Why do they join the programme and why do they leave? What qualities do they like and don t like about the MFI s products and services? What is important to clients? Product and Service preferences. What do staff think is important to clients? (Does this differ from what is important to the customers?) What quality of service is the MFI currently delivering to its customers (internal and external)? What has already been done in an attempt to improve service quality? What can we do now to improve client retention? Responsibility to Clients Do client feel that their data privacy is safeguarded? Do clients understand basic terms and conditions of financial products (interest rate/fees, loan term, insurance premium/benefits) Do clients get signed receipts or passbooks for each and every financial transaction? Are there surprise visits by management to verify adherence to policy? Do staff treat clients with courtesy and respect? Does the MFI have responsible collection and delinquency management practices? Do women clients have any special preferences (meeting times, female staff, etc.)? SPM Focus Group Discussion (FGD) Guides: In order to better understand clients needs, preferences, profile, and level of satisfaction with the products and services provided by an MFI, the following FGD guides have been created or adapted. Client Outreach: To understand client profile what categories of clients the MFI is reaching out and not reaching out (missing). To understand why people join and the cause for dropouts with a view to identifying steps the MFI might take to retain good clients. Client Satisfaction: A focus group version of client satisfaction to assess clients level of satisfaction (probing around the 8 P s people, product, price, promotion, physical evidence, place, processes, and positioning), as well as to obtain clients ideas and suggestions on customer service and how the MFI can improve on the same. Attention! It is very important that the MFI staff or consultants that administer the focus groups and PRA tools are properly trained. Proper facilitation of a focus group or PRA discussion requires experience and knowledge of how to interact with clients and put them at ease, how to probe for answers, how to involve a diversity of those in attendance, and how to gather the most accurate and useful data.

34 Social Performance Management Toolkit Manual 32 Client Dropout: This is a guide for understanding the characteristics of dropout clients, and the primary reasons behind why they are leaving (are they pushed out because they are poor or leave because they have access to other sources of credit). Client Interaction: The client interaction template contains other short FGD guides around service quality, other product/service needs and preferences, and questions designed to validate information obtained at the Head Office or through documentation (e.g. client understanding of terms and conditions, delinquency management practices, etc.). These short sections or FGD guides can be used as a short complement to an exercise focused around one of the PRA tools or customer surveys. Empowerment: The empowerment focus group guide aims to determine if clients have grown more confident and gained more self-esteem while participating in the program. Also, it tries to identify how those qualities have translated into specific changes in behaviour that demonstrate empowerment. Focus Group Discussions Facilitating effective FGD requires training and experience. Without such a background, there is a risk that focus groups will not reveal interesting or valid information, and worse may even be harmful by raising client expectations for new products and better service benefits or stirring passions around a particular grievance (e.g. high interest rates). Therefore, members of the SPM Team, whether MFI staff or consultants, should not attempt to lead FGDs before receiving training and particularly MicroSave s acclaimed Market Research for Microfinance toolkit. MicroSave Resources Market Research for Micro Finance Toolkit Sampling Strategy During an SPM diagnostic, the sampling strategy generally followed is one of maximum variation to allow for a representative sample that adequately showcases the diversity of clients and branches. Usually, to accomplish this aim, the SPM team selects both branches and client groups that are at opposite ends of the spectrum of diversity: e.g. Maximum Variation in Client/Branch Selection: near and far, urban and semi-urban/rural, new and old, high performing and low performing, poor Near and Far Urban and Rural/Semi-Urban and non-poor, and dropouts. Often times, New and Old diversity may be sacrificed to some degree if there High/Low Performing are time/distance constraints (e.g. branch is 300 Poor/Non-Poor km away on poor roads during monsoon season!) Dropouts and depending on the availability or existing meeting times of clients and groups. Other focus group sampling strategies that may be relevant, depending on the context: Client recommended clients (chain) to identify who knows the most about a particular phenomenon Semi-random: by location, meeting day/time, etc. Extreme or deviant cases (outstanding successes or notable failures) e.g. defaulters 30 days in arrears, the very poor in a programme.

35 Social Performance Management Toolkit Manual 33 Obvious cases that clearly demonstrate the phenomenon you want to access e.g. persons with excellent repayment record in high loan cycles, clients with high savings balances (SHG) Participatory Rapid Appraisal (PRA) / Survey Methods Another powerful, qualitative method for collecting data involves the usage of Participatory Rapid Appraisal tools, in which clients are more actively involved in shaping and creating knowledge. The following tools have been borrowed from MicroSave s internationally acclaimed Market Research for Microfinance toolkit, as well as the SEEP/AIMS tools. They have been adapted where needed to the aims of the SPM toolkit. Simple Wealth Ranking (SWR): This form of wealth ranking provides a rapid way of segmenting a community into three or four basic categories, and is useful in situations where you have many households in a community to rank. This is useful for targeting. If, for example, you want to interview only poor people, this exercise will give you a good indication of which households to focus on. This exercise can also be useful in a rough impact assessment, and for examining the socio-economic characteristics of people who chose to join (or do not join) the MFI and also those who leave or whose accounts become dormant. Wealth Rank Name of Head of Household Example: Simple Wealth Ranking for an MFI Notes 1 st Saleem In what ways are they wealthy? Wife has own business working in market; man has own welding business; own personal house; has several rental units;; has essential household items e.g radio, TV; has another business harvesting and selling rain water to the community. Why are they wealthy? They had access to credit from a friend and they were trustworthy enough to return money and then keep borrowing. Hardworking 2 nd Jyoti What? Has 15 one room rental units; has own tailoring business making women s dresses; own sewing machine; has other rental units in Kabowa; has TV, radio, bicycle etc Why are they relatively wealthy? Worked hard in the days of her youth to plant cotton, sell, save and investing; handles her assets very well. Product Attribute Ranking (PAR): PAR is a method for finding out what participants view as the key elements/criteria/attributes in financial services and how relatively important each is. Alternatively, it can be used to understand clients satisfaction/dissatisfaction with different elements of the MFI s financial services. Example: Product Attribute Ranking Criteria/component Rank Comments

36 Social Performance Management Toolkit Manual 34 Customer Service 1 Clients value the customer-friendly and professional services delivered by staff Repayment Period 2 Monthly instalment amount is well connected to income levels of clients (ability to repay) Treatment by Staff 3 Whether clients are on-time or late with a payment, staff treat them with proper respect Timeliness of Loan 4 Clients want a loan fast particularly at the time of emergency. Loans should, at the very least, be given consistently within the prescribed time Communication 5 Clients are aware of terms and conditions, as well as any changes in policy Relationship w/staff 6 Behaviour of staff creates and sustains the MFI s relationship with clients Relative Preference Ranking (RPR): RPR allows us to see how clients perceive the financial service providers and components of the financial services they provide. This tool is particularly informative in a competitive environment and as part of knowing your clients better. It also helps challenge pre-conceived notions about poor people s attitudes towards financial service providers, what matters to them, and why they have those preferences. Example: Relative Preference Ranking for SHG MFI Product Attribute Bank MFI 1 MyMFI Opportunities for innovation and change Customer Satisfaction May consider training staff in better customer service and providing incentives Repayment Period Tailoring repayment period to fit client needs Communication Client have to be clear on terms and conditions, through documents and verbally Timeliness of Loan Look at process mapping to cut the long delays for disbursement Relationship with MyMFI should continue to high importance is staff given to proper treatment of clients Customer Service Attribute Ranking: To measure the importance of service factors for customers, and then evaluate the institution s performance on each factor. This version of the ServQual is run very much like a Product Attribute or Relative Preference Ranking. First, clients select the customer service attributes that are important to them, and then they rank them in the order of preference. Finally, they place items next to each attribute and rank the MFI in each of the categories. Example: ServQual (PRA version) Criteria/component Rank Comments Trustworthiness of Staff 4 Clients feel that they can trust staff MyMFI Friendliness of Staff 3 Staff are courteous most of the time with clients Communicates Terms 3 Clients remember being explained terms and conditions but and Conditions cannot remember exact details anymore Timeliness of Loan 2 Occasionally there are delays in accessing follow up loans Accurate Recordkeeping 4 Records seem accurate and receipts are given Professional staff 4 Staff behave in a professional manner

37 Social Performance Management Toolkit Manual 35 Household Generation, Receipt And Spending Of Cash Analysis: This tool is useful in determining which sources of income are generated, received and spent by men, by women and by both, and why. This can help MFIs understand the intra-household dynamics in the context of income flows and begin to assess risk profiles associated with lending to specific income generating activities and/or households. Source of income: Cow Fattening Coffee Vegetables Groups Casual labour Salary Division of Labour Receipt of Cash Decision Over Use of Cash Men Women Men Women Men Women *** ** ** **** ***** ** *** ***** *** * ***** ***** ***** ** **** ***** ***** *** * ** ***** * ** * *** *** ***** *** ***** **** ** Surveys/Questionnaires Surveys and questionnaires are a simpler form of gathering useful client data, requiring less facilitation skills than focus group discussions and PRA tools. However, for the most honest responses, it is best not to use the same field staff that work with said clients to administer them. Senior management staff, middle management staff and branch staff other than their own are the most appropriate persons to administer the surveys and questionnaire. ServQual: To evaluate the institution s performance on each service factor included in the survey and pinpoint areas of strength and weakness in customer service. Categories of customer service include Reliability, Empathy, Efficiency, Responsiveness, and Assurance. Reliability - Your ability to perform the promised service dependably and accurately Empathy - Care and attention the organisation provides its customers Efficiency -The speed/appropriateness of your product/processes Responsiveness - Your willingness to help customers and provide prompt service Assurance - Knowledge and courtesy of your employees and their ability to inspire trust and confidence Customer Service Questionnaire: A short questionnaire that clients can fill out either in the field or when visiting the branch office. It is used to measure the level of customer satisfaction around a few basic indicators and obtain recommendations for improvement. (See SPM Guide to Tools for sample Customer Service Questionnaire) Example: Selection from Customer Service Questionnaire Please rate our performance and service level. Indicate your opinion by circling the mark, which corresponds to your views as indicated in the choices below. Rating Scale: 1 - Very Poor; 2 - Poor, 3 Average; 4 Good; 5 - Excellent a) Speed of service b) Willingness of the institution to listen to me and respond to my needs c) Friendliness of staff

38 Social Performance Management Toolkit Manual 36 Exit Survey: The purpose of the Client Exit Survey is to find out and track the following information: 1. When the client left the program 2. Why the client left the program 3. What the client thinks about the program s impact on her and her business 4. What the client thinks about the program s strengths and weaknesses, and 5. When (or if) the client will rejoin the program and/or recommend the program to friends and family 26. (Refer to SEEP/AIMS Tools available online for sample Exit Surveys) Product Attribute Ranking / Relative Preference Ranking: The PAR and RPR tools can be used with staff as well as clients. This exercise often provides a thought-provoking contrast, when results of what staff think is important to clients is contrasted with what clients themselves think. 26 Nelson, Candace and Garber, Carter. Learning from Clients: Assessment Tools for Microfinance Practitioners. The SEEP Network. DC.